These are the dog days of August, when historically traders from Wall Street to Sheikh Zayed Road escape for cooler climates, collect their heads and square positions for the autumn.

That practice has not held up for the past few years. The credit crisis which took hold in the U.S. this time last year proved to be the latest example of how we live in a 24/7 world, even this month.

Colleagues and friends have called in sharing tales of the various Middle East players spotted on the streets of London, as they mix business and pleasure to escape the heat.

The actions -- or inactions -- by both the U.S. Federal Reserve and the Bank of England this week are not signs that central bankers are caught up in the summer lull; in fact it is quite the opposite. The volatile mix of slow growth and inflationary pressures -- better known as stagflation -- makes it difficult for them to move either way. So the response is to stand pat for now and send signals that they are being vigilant and are fully aware that the worst may not be over.

The vote within the Federal Reserve was close to unanimous, 10-1, with one lone member of the committee urging to raise rates to head off the strong inflation. In their statement that followed, the open market committee stated that the inflation outlook remains “highly uncertain.”

Central bankers see that the housing market is not close to bouncing back and that unemployment, at 5.7 percent, is at a four year high. Americans are not feeling all that perky about the future and neither are their brethren across the Atlantic.

A consumer confidence survey put out by the Nationwide Building Society of Britain this week posted the largest drop in four years and the lowest level since the survey started. The culprits are the same as in the U.S.: weak house prices, layoffs to come and rising costs. Inflation in the country is running at 3.8 percent, nearly double the government’s target.

Interest rates may be at reasonable levels in the U.K., but banks are being stubborn about their lending. As a result, home repossessions have jumped 40 percent since 2007. The International Monetary Fund this week is now predicting growth of 1.4 percent this year and just over one percent next year, with inflation maybe peaking at five percent.

With this backdrop and despite the boost in consumer spending by our Middle East visitors this summer, I am not getting too excited by the fall 20 percent fall in crude prices or the subsequent rally in the U.S. dollar. One cannot get a good read of market sentiment during thin trading, when most senior business leaders are not at the helm or moving at the same frenetic pace.

Outside of the G-8 countries and closer to our region of focus, the Middle East, the energy market correction and the rise of the dollar are taking the heat off of policymakers to answer to calls to put more crude on the market or to reconsider the historic peg to the U.S. currency.

Neither seems to be of pressing concern at this juncture. $147 oil sparked a great deal of worry as does the quick retreat of nearly $30 off that peak, but one can see the absence of a summer lull in a different light. Perhaps we may witness the fabled “Goldilocks Scenario;” an oil decline, steady interest rates and a rising dollar which provide a mix that is not too cold, not too hot, but just right -- for now.

John Defterios’ blog accompanies the weekly business program, Marketplace Middle East (MME) that is dedicated to the latest financial news from the Middle East. As MME anchor, John Defterios talks to the people in the know, finding out their opinions on the big business moves in the region, he provides his views via this weekly blog. We hope you will join the discussion around the issues raised.

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